Thursday, September 20, 2007

A strengthening Indian Rupee

For the first time in more than 9 years, the Indian Rupee crossed Rs. 40 mark against US Dollar!

The Indian Rupee has been on a rally that had put many a companies, especially IT and other export oriented ones, on fire. The Big Four of Indian IT industry (TCS, Wipro, Infosys, Satyam) had already lost almost 75,000 crore of market capitalization. So is the story of textile, jewellery and drugs sectors. This article which came on rediff.com explains the side effects of Rupee appreciation.

While an appreciating Rupee is the sign of a strong economy, it may not be good for one that depends heavily on exports and outsourcing. As far as exports go, the back firing happened because they charge clients in dollar terms. Had they charged foreign clients in Rupee terms, they wouldn’t have been affected by Rupee strengthening. But India needs dollars and exporters need margins. So there is no option but to get dollars from foreigners. I was wondering, what if we had charged them in Rupee terms? When will we become strong enough to do that? One’s wildest dream may be, but it’s sweet to think about such a situation. May be, its not too far...